Asian Shares Mostly Up; Exporters' Stocks Weigh On Tokyo

ShriNavaratnam

SINGAPORE (MarketWatch) -- Most Asian stock markets were modestly higher Tuesday, but weakness in some exporters' stocks weighed on the Tokyo market.

Japan's Nikkei Stock Average was down 0.1%, Australia's S&P/ASX 200 was up 0.1%, South Korea's Kospi Composite was up 0.3% at 2001.70 and New Zealand's NZX-50 was 0.1% higher.

Dow Jones Industrial Average futures were down 11 points in screen trade.

Shares in Tokyo were slightly weaker as some exporters' stocks took a breather from solid gains the previous session. "We are seeing a temporary market correction on the back of a stronger yen, combined with a pre-existing sense of overheating," says Yutaka Miura, a senior technical analyst at Mizuho Securities.

He said investors are turning their attention to the Federal Reserve's policy-setting meeting later in the global day and the Bank of Japan's quarterly tankan survey on Wednesday.

Honda Motor was off 0.5%, Sony dropped 0.4% and Canon was down 0.6% .

Toshiba tacked on 0.5% after the Nikkei reported it will spend about Y100 billion to build a liquid crystal display panel factory. Kirin Holdings rose 1.4% after it said it will cancel 2.89% of its own shares on Dec. 30.

The Sydney market was modestly higher as strength in miners offset weakness in banks.

Major bank stocks were off 0.2%-0.8% as weakness in their U.S. peers encouraged profit-taking after Monday's gains, which were driven by relief over the government's benign banking sector reforms. In the resources space, BHP Billiton rose 0.5% and Rio Tinto gained 0.4%.

AGL Energy fell 4.3% after the firm confirmed Tuesday that it has not acquired any electricity assets being privatized by Australia's New South Wales state.

Macquarie Private Wealth Investment Adviser John Milroy said a pause in recent selling of U.S. bonds may cap the equities market. "Clearly there's been some large-scale switching from U.S. bonds to equities in the past week," he said. "As that slows down, you could see equities drift sideways."

Analysts continued to watch out for signs of improved sales of the country's tech products during the U.S. holiday season. Hynix Semiconductor rose 2.1% and LG Display advanced 0.5%, while Hyundai Motor added 2.2%.

Woori Finance Holdings fell 3.3% on worries that the government's efforts to sell its 57% stake in the firm may falter after South Korean groups that had shown interest in the shares said late Monday that they were dropping out of the sales process.

Trade in New Zealand shares was subdued as traders digested an update from the government on the country's fiscal and economic position.

The government said the country's short-term fiscal position has worsened as economic growth has been weaker than forecast in its May budget and due to a series of events, including an earthquake that hit the Canterbury region in September.

Finance Minister Bill English said the budget deficit for the fiscal year ending June 30, 2011 is "on the outer limits of the government's comfort zone."

Fletcher Building rose 0.4% after November housing data showed an improvement following several months of weakness.

Auckland Airport added 0.9% and Telecom was up 0.4%.

The U.S. dollar was trading in a tight range as investors awaited the outcome of the Federal Reserve's rate-setting meeting later in the global day.

The dollar was partly weighed by a fall in U.S. Treasury yields on Monday, and by a Moody's Investors Service report that the U.S.'s proposed tax package increases the chance of a negative outlook being placed on the U.S.'s AAA rating in the next two years.

The Moody's report and caution ahead of the Fed meeting will weigh on the dollar, said Mike Jones, a currency strategist at the Bank of New Zealand. "The Fed's comments around (bond) purchases and the recent improvement in the U.S. economic outlook will be critical to whether the U.S. dollar can continue to rally," Jones said. "Should the Fed indicate it is now less likely to fully implement its (quantitative easing) plans, we wouldn't be surprised to see U.S. bond yields extend their recent gains."

The euro was fetching $1.3391 against the U.S. dollar, from $1.3393 late Monday in New York, and was at Y111.70 against the yen, from Y111.69. The dollar was at Y83.44, from Y83.39.

Lead Japanese government bond futures were up 0.34 at 139.29 points, spurred by U.S. Treasurys' gains on Monday. Traders say investors were also focussed on the 20-year JGB auction due later in the day. The yield on 10-year cash JGBs was off 2.0 basis points at 1.225%.

Spot gold was at $1,395.70 per troy ounce, up $1.20 from its New York close on Monday. January Nymex crude oil futures were down nine cents at $88.52 per barrel on Globex.

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